A Quick Explanation: Voluntary Redundancy

HomeBlogA Quick Explanation: Voluntary Redundancy

The world of rapidly evolving technology is constantly changing the kinds of jobs we work. Sometimes, these changes shift the roles that employees occupy, meaning some roles are no longer relevant. When this is the case, employers may offer an employee voluntary redundancy. Business Kitz have written this blog post to give you some more information on this tricky concept.

What is voluntary redundancy?

Voluntary redundancy is when an employee agrees or volunteers to be made redundant by their employer. Employers generally offer a financial incentive to employees to encourage them to voluntarily resign. This is subject to a formal Deed of Release (check out this blog by Legal Kitz for an explanation of a Deed of Release) which terminates the employment relationship and prevents the employee from suing the employer.

It is preferable for a business to have their employee voluntarily resign as it ensures that the employment termination proceedings are amicable and the company’s reputation is protected. It also can make the process of typical redundancy more efficient, as employers may be able to eliminate the usual consultation processes required.

The employee also reaps the benefits of taking voluntary redundancy. They are typically offered a greater sum of money (compared to compulsory redundancy) and often include the opportunity to negotiate their redundancy terms. There are also generally no restrictions on taking up employment after being made redundant and you are free to look for a new job as early as the redundancy notice period. However, if an employer does stipulate that you are prohibited from seeking employment for a disclosed period, they are required to include compensation for this time in the redundancy package.

What are the reasons for voluntary redundancy?

Making an employee redundant may be necessary when a company no longer requires the individual to complete an employee’s job or when a business becomes insolvent or bankrupt. The process of redundancy includes consultation between the employee and the business, where it is clarified why the role is being redundant and possible options of keeping the employee in the business. If the employee volunteers to be made redundant, this process may alter. There are many reasons why a business may offer voluntary redundancy to employees. For employers, it saves them from making difficult decisions about which employees to dismiss. This is also a courtesy to the employee by giving them the option to leave on their own terms and minimise the impact on company morale. If an employee leaves on good terms, this reduces the negative impact on client and staff relationships. If an employee agrees to voluntary redundancy, they are still entitled to and owed redundancy payments. 

Are their any risks associated with this?

It is important to consider the possible risks associated with voluntary redundancy. The employer must carefully consider who they offer voluntary redundancy, as this may result in them losing skilled and important employees. If an employer does decide to offer voluntary redundancy to specific employees, they must be careful to not be discriminatory towards either age or gender. 

What about hybrid redundancy?

There is also the option of hybrid redundancy. Combining voluntary redundancy and the traditional redundancy approach can ensure the best results for both parties. Whilst this may discount some of the associated benefits, it also decreased the risks associated. If this is an approach that interests you, professional and qualified assistance is recommended. 

Legal advice

If you require further assistance regarding voluntary redundancy, our sister company, Legal Kitz, can help! They specialise in employment-related matters and offer a FREE 30-minute consultation to assist with any of your queries. Additionally, our subscription plan offers employers access to over 150+ legally compliant, employment, and HR-related document templates to take the hassle out of the legalities of being an employer. Click here to find out more about our subscription plan.